For months now, homeowners that have been thinking about selling have heard about the massive number of homes that are either in some phase of the foreclosure process, or that have already been turned over to the bank (REO Properties, for Real Estate Owned by the banks). The overhang of “Distressed Properties” poses a real concern for homeowners, not necessarily because of the risk of further price declines, but rather because it’s unlikely that prices will begin to increase until the majority of the Shadow Inventory is absorbed.
But unfortunately for prospective sellers, the above situation is only half of the story. Homeowners thinking about selling should also be extremely concerned about “Pent-Up Seller Demand“. This term describes the number of homeowners that really want to sell, but have decided to wait for prices to recover. The more homeowners there are waiting, the longer it will be before prices recover. Remember, this group has not been willing to accept lower prices. It will likely take a much longer period of time before this inventory is absorbed. Also, keep in mind that it’s difficult to determine just how many homeowners have “postponed” plans to sell.
There is however, an excellent approach that has been overlooked by nearly every seller. This approach could help determine just how bad the situation is in a prospective seller’s area, and the results can be very sobering. If a homeowner is thinking about selling, they should ask their Trusted Real Estate Advisor, to research all of the homes in their area, that were listed for sale and subsequently expired or were withdrawn from the market. By checking each expired listing to see if it has either re-listed or sold, an agent can identify the homeowners that would like to sell, but have chosen to wait for better market conditions (which translated means, better prices).
In some cases, this number can be substantial. It’s typical for five to ten percent of residents in a neighborhood to move in any given year. An agent may find that another 10-20% of the residents were unsuccessful selling and have chosen to wait. With that much future competition, it could take years for market conditions to return to normal. Failure to research “Pent-Up Seller Demand” can mislead a prospective seller into believing their local real estate market will recover much faster that it will realistically recover. It’s imperative that agents share this data with homeowners to ensure realistic sales timeline and price expectations.